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Conclusion: The non-uniformity in computing State ADA creates inequities in the computation of the minin.um rates --currently based on one-half the State or one-half the national per pupil cost, whichever is greater.

Recommendation: The methods and procedures used by each State for
computing ADA should be carefully reviewed. Administrative
procedures should then be developed to compute ADA for all States
on a common basis. Such an administrative procedure would require
a legislative change in the law.

Conclusion: A substantial number of LEA's experienced difficulty in computing a correct total ADA.

Recommendation: That the procedure for computing the Federally connected ADA as recommended in the following item be initiated. This procedure should solve the problems associated with the computation of the LEA ADA.

Conclusion: The method used to compute the Federally connected ADA needs to be simplified.

Recommendation: That either a national ratio of ADA to membership be developed to be used in computing the Federally connected ADA or that payment be computed on the Federally connected membership.

Conclusion: Duplicate payments are not considered significant when compared to the total program.

Recommendation: That no change be made relating to duplicate payments.

Conclusion: Limited staff in both the regional office and at the headquarters of the USOE has made it very difficult to properly administer all phases of the Impact Aid Program.

Recommendation: That program staff be increased sufficiently to properly administer the program.

Conclusion: That adequate staff has not been available to properly review and analyze all the rate data submitted by States.

Recommendation: That adequate staff be provided so that USOE can properly develop methods and procedures for establishing rates.

Conclusion: The inclusion of the LEA's which did not meet the three percent eligibility requirement would skew the final outcome. Hence, this fact should be carefully considered in the interpretation of this portion of the report.

Another consideration is that even though a number of LEA's would have to raise local taxes by a small percent, this percent is equally as important to the local taxpayer as it is to the Federal Government with whom the responsibility rests.

Recommendation: None

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Conclusion: The portion of the GAO report that deals with alternate eligibility requirements and their effects on the total cost of the program does not apply to the current PL 81-874 as amended by PL 93-380.

Recommendation: None

Conclusion: Impacted LEA's appear to have a greater need for Impact Aid for two reasons: (1) the assessed valuation for Impact Aid LEA's is generally less than for non-impacted LEA s and (2) most impacted LEA's are located in urban areas where more services are demanded and operating costs are higher than in less populated areas.

Recommendation: None

Conclusion: The financial burden on the local taxpayer to educate the child whose parent works on a Federal property within commuting distance in another State is no less a burden to educate than the child whose parent works on Federal property within the school district or the child whose parent is on active duty in the uniformed services.

Recommendation: In order to avoid reducing the level of education for all children, including the uniformed services category child, all of the "b" category children should be counted for 50 percent of the rate.

Conclusion: Based on the legislative history it clearly appears to be the intent of Congress to compute payments on a minimum rate. And according to the GAO report, it appears that the law is fulfilling the intent of Congress.

Recommendation: None

Dr. FISH. Thank you, sir. We will restrict ourselves to key points that we consider particularly important regarding impact aid. In addition to the members of the panel, Mr. Quie asked a question yesterday about the Section 4-E district. There is one in the country, and Mr. Wilcox, from Nebraska, is in the audience. We would like to be responsive to the questions of the committee.

I would like to say that we would ask a change in perspective in looking at impacted aid. Here in Washington many people forget this is a program that serves local schools and local school districts. We are concerned that in our communities many people do not understand this program as being controversial.

For their purposes, they see the property of the tax roll. They are aware of the children being in the schools, and the costs increased because of the effect of having so many children from federally connected families.

We would like to go further with that line of testimony, but we won't-just to mention that the GAO report based on the old law did show some very significant facts about impact aid, that it will increase the local property tax in many, many communities across the land, and the local property tax is probably the most regressive and the hardest to the lower income people of our communities. Just a small fact-in San Diego, in the 1975 census, of the 251,000 heads of families, 43,000 were retired and had as their primary source of income their retirement payment. These people would have to assume the burden, these people would have to vote the tax increase that would be necessary if impact aid were lost.

Now, in regard to the program itself, I have a few points that I would like to mention.

Impact aid is general aid. It supports the basic educational program of the school district. If it is lost, most school systems are restricted to two basic options.

One, they can reduce programs. Remember that school district programs are expensive-programs are over 80 percent people, and the people that would lose their jobs in any reduction in funds are invariably the lowest paid, the most in need. They are usually the nontenure teacher or the classified employee.

Of course, we can also turn to CETA, maybe, and through another Federal program employ some of these back. But, we think that is a rather inefficient process.

Secondly, the other alternative would be to increase property taxes directly. In California the only method available to us is to go for a tax override election. We would have the unfortunate problem of holding a tax override election for the local community to assume a Federal tax burden. Somehow I do not believe that would be a very popular option.

Finally, many other states even have constitutional prohibitions. I believe that several of my colleagues will speak about that fact. Secondly, impact aid is only paid for students who are attendants at the school system. We do not get paid for students we do not serve. This is very significant. If the nontaxpaying property does no work for us, there is no payment. This may seem rather ridiculous, but remember there are such things as military cemeteries.

94-584 O 77-7

We have one occupying some of the choicest land in San Diego, and we have one student whose father is the maintenance man or gatekeeper at that site and lives on the property. That is the only income we receive for over 100 acres of valuable land.

The third point that we have is that the impact aid school districts derive generally about half of their revenues from the local property tax. Of this, less than one-half comes from residential property. More than that, the other part of it comes from commercial and industrial property. We cannot separate category A and B students, therefore. We see no distinction.

We also remind you that the payments for A students and B students generally are even greater than the discrepancy I mentioned. In San Deigo in 1975-76, we received $600 approximately per A student. Per B student we received $199. We do not get an equitable break on the B student.

Also, we have the factor that actual payments received by districts over the last several years are continuing to call back in regard to the costs of education and the loss of property tax. Also, we have the fact that the Federal Government's activity is not spread evenly across this country. The Federal Government does operate bigger facilities, major facilities, in some communities.

You just heard of Eglin Air Force Base, with half of a county in Florida. In San Diego, we point to 14 military installations within the city limits. This includes a naval air station, naval base, marine training center, major hospitals, and other facilities operated in San Diego.

In some of these facilities, actually commercial establishments serving the federally connected military dependents from the local community are operated on nontaxpaying property.

We have also heard that impact aid should be phased out. We appreciate this committee's openmindness and willingness to hear our story. We understand the necessary consideration for reauthorization of the legislation. But, we would say with regard to phasing out, the answer is very simple. If you want to phase out impact aid, cut down Federal activity.

Impact aid is a dependent activity. Impact aid student counts rise and fall as the Federal Government enters into new areas of activity and closes out old. Impact aid as a dependent activity, therefore, is very easy to control. We see it as a necessary commitment and corresponding responsibility. We do not see it as discretionary.

The final point that I would like to make is that impact aid is an extremely low cost program to administer. This probably is one of the reasons why we have so much difficulty in Washington. We do not have a large Federal bureaucracy here. We do not have a number of consultant fees to administer.

The people that come forward to speak for impact aid are from the districts. We have a local perspective. Impact aid is tied directly into our financial programs. It is not discretionary to us. It is basic. Therefore, as a low cost program to administer, we like it.

In my school district, with over 27,000 impact aid children, we have one accountant and a clerk assigned to the central office administration of the program. The monies spent in impact aid go into support of the basic education of the children.

Remember, of our expenditures overwhelmingly administrative costs are in the very low percentage point. So, most of this money we can say is in direct classroom support. Some day we would like to see the comparison with other areas of activity. We also realize this is part of the characteristic of being a general aid program. In regard to the administrative aspect of the program, I would like to mention that the GAO report, which was quite a bit on the clerical aspects of the program and on the old law, does show, and the testimony yesterday did indicate, that there was no fraud in the program. It also indicated that the contested cards in the program were less than 1 percent.

We would say that the contested cards resulted when school districts operating by instruction from the Office of Education claimed cards that they were not absolutely sure of with the understanding that when the auditor came by from the regional office, each would be examined and they would be allowed or disallowed.

After this process was completed, the degree of contested cards dropped to one-third of 1 percent, or .34 of 1 percent, actually. We consider that an extremely good percentage. We would like to hold it up as a model for other programs to reach.

We consider impact maybe not an old program whose time has run out, but a program that has been successful, meets its needs, and should be looked at in the context of the future of educational funding. This may be a good place to go, a good direction to proceed. In summation, we now understand that the Office of Education, the Department of HEW, is going to do yet another study of impact aid. We are concerned that programs, ideas, have been generated regarding our program, and we are quite concerned, as I indicated before, that this is so basic to our basic program support, and we have to make decisions and contractual relationships based on this. We would like to ask the privilege of participating in this study. It is too vital for us to have this happen without us knowing what is going on. So, we would like to ask the committee if possibly this recommendation could be made.

Also, we would like to, from our vantage point of a local school district, or local school districts, to have an opportunity to submit some questions for study. We are very well aware that the results of studies are determined by the questions that are asked.

We would like to ask the questions, for example, that were raised by Mr. Heftel about the loss of property and tax revenues to federal activity, we would like to have an opportunity to bring up several other items that will emerge during the next two weeks. Thank you very much.

Chairman PERKINS. Thank you.

The next witness is Dr. Francis L. Paul, School Business Administrator, Ayer Public Schools, Ayer, Massachusetts.

Without objection, your statement will be inserted in the record.

STATEMENT OF FRANCIS L. PAUL, SCHOOL BUSINESS
ADMINISTRATOR, AYER PUBLIC SCHOOLS

Mr. PAUL. I am Francis L. Paul, School Business Administrator for the communities of Ayer, Shirley, Boxborough, and Fort Devens,

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